Vietnam is the miracle economy in the making. But as the inheritor of the mantle of the East Asian exceptionalism destined to make the ranks of OECD countries, it also faces a plethora of growing pains: notable is the electric power supply and demand mismatch. Vietnam’s GDP compound growth rate over the last decade is 8.1%; its power demand grew 12% per year for the decade 2010-2020. That should strain its capacity to meet power demand. Vietnam’s total installed power capacity of 80.5 GW is about three times greater than that of the Philippines (28 GW).
Vietnam’s power mix is 48% coal, 47% hydro, 3% renewables, or 50% renewables in total. The newly formulated Power Development Program 8 (PDP8) sees the renewables share rising to 70%. That means much more solar and wind power to meet its net zero commitment by 2050. Further scaling up hydro is difficult and vulnerable to droughts.
The Northern Region of Vietnam depends on coal generation for 48% of its power, while hydroelectric plants supply 43%. Due to a prolonged and severe heat wave that dried up dam reservoirs in 2023, 11 hydro power plants had to shut down removing 5,000 megawatts of power from the grid. This resulted in crippling power outages of multiple hours each time. Northern Vietnam Region hosts 26% of FDI inflow into Vietnam. Among these companies are Apple, Foxconn, and Samsung, who were asked to lower consumption by 50% and restrict operations to between 7 a.m. and 5 p.m. South and Central Vietnam may actually have exportable surplus power but, as in the Philippines, grid capacity is limited and congested. For example, the SMW Rooftop Solar System in Dong Nai, now in operation, is massive: at 5-MW capacity, 7 GW per year from 12,300 rooftop solar (RTS) panels. It is projected to earn $565,000 per year in revenue for the RTS owners. Being however in the South reduces its role to relieve outages in North.
Vietnam’s PDP8 in 2023 shows why it has forged ahead. PDP8 has gone all out on rooftop solarization: by 2030 it targets 50% of all office and residential buildings being solarized. It plans to raise to 2,600 MW its current 200-MW RTS capacity. The fuss over PDP8 RTS is due not to the heightened ambition of its targets but to the fact that “cheap talk” is not in Vietnam’s DNA. This anchors the widespread belief that Vietnam is an encore of the East Asian exceptionalism.
What is clear is that the PDP8’s new massive rooftop solarization initiative is (still) restricted to self-consumption and will not enjoy net-metering nor export facility to third parties. Any excess generation exported to the grid from rooftop solar will fetch “zero” price, unlike in Metro Manila where it gets the generation cost of Meralco or about half of your power bill. The power parking fee in the Philippine grid is about P5 per kWh. The “no export policy” is because the Vietnam power grid is already congested and results in the wasteful curtailment of renewable solar power generation in the South and Central Vietnam. Curtailment and grid congestion are common among growing economies. In the Philippines, the National Grid Corp. of the Philippines’ submarine grid access by Negros Island power producers is rationed, resulting in wasteful power curtailment.
An emerging part of the solar photovoltaic (PV) ecology is the rising involvement of consolidators/brokers/RES who buy excess power from rooftop solar power producers and resell this to third parties. There are already some outfits in the Philippines who will finance and install rooftop solar PV systems with part or all of the generated power being absorbed by the rooftop owners. The rooftop owner and the installer share the savings generated. The arrangement Solar PHL, which installed the solar PV, and SM North EDSA (the owner of the parking building rooftop) has the latter as the sole buyer of power.
Vietnam’s PDP8 own-consumption stricture is a drawback but it will not cripple the solarization program, especially for large power customers. For smaller customers, the no-export rule will mean that rooftop solar PV must be matched with battery storage to absorb excess production during the day; this, however, normally doubles the cost of the solar PV installation and doubles the payback period. A further knock-on effect is on the demand for EVs in which Vietnam is trying to be a global player. EV charging soaks up battery stored power. PDP8 is still silent on the solarization of factories and industrial estates.
Why Vietnam reacted with vehemence is hardly atomic science. The very self-same natural force, abundant solar radiation, that blankets the land, drains the dams and spikes the demand for cooling power causing outages, can also be harnessed to produce power through solar PV technology. Vietnam already has thriving land-based solar and wind generation due to a generous fit-in incentives program but which it paused due to grid congestion. It already is a big producer of solar panels. Rooftop solar, however, continues to enjoy fit-in incentives as of 2024 ($0.0935 per kWh for a certain category). But it took a crippling power outage in Northern Vietnam region in 2023 to rouse Vietnam to the easy pickings in RTS.
RTS is multiply attractive:
1.) The most stubborn source of delay in increasing generation capacity, i.e., NIMBY (Not in My Backyard) and lengthy licensing issues and grid congestion, do not stand in the way of RTS. RTS only repurposes an idle rooftop, a true circular economy feature. From a solar PV contract closed today, power will start to flow in six months or a very short turnaround time. In comparison, it takes 10 years to realize electron flow from nuclear power plants.
2.) There are zero opportunity cost issues from alternative use of RTS.
3.) RTS is modular: one can start small and upgrade as needed.
4.) For large establishments, RTS is already very bottom-line friendly; reasonable ROI has replaced love for mother earth as reward. Without any government incentives, the Gokongwei Group has solarized all its 23 malls so that it now has a capacity of 32 MW. Bravo!
5.) Rooftop solar reduces the income elasticity of demand for electricity, thus reducing the investment required for grid and baseload power expansion.
6.) In situ solar power generation means no transmission cost and no grid-based state exactions (e.g., universal and missionary charges) all in all amounting to about 15% your power bill in the Philippines. A reduction of 15% in power cost puts Philippine cost of power for large establishments at par with our rivals in the ASEAN.
The Philippines has abundant radiant energy and abundant sprawling idle rooftops that when combined with solar PV technology can eliminate the recurrent red or yellow power alerts. Vietnam has thrown down the gauntlet. Can we as a nation muster the courage to transform idle rooftops into solar PV farms?
The National Government and government agencies, especially the knowledge and technology agencies (e.g., the Departments of Science and Technology, Energy, Education, the Commission on Higher Education, the University of the Philippines, and state universities and colleges), should lead the way in harnessing the unlimited nuclear fusion power in the sky via rooftop solarization. Congress could raise the specter of a contingent tax on idle rooftops. The Department of Finance can mandate a certain percentage of the usual budget allocation for equipment be earmarked for rooftop solarization in the next two years. This could save the state treasury lots of money in power savings in this and coming decades.
Happy Easter!
Raul V. Fabella is a retired professor of the UP School of Economics, a member of the National Academy of Science and Technology, and an honorary professor at the Asian Institute of Management. He gets his dopamine fix from tending flowers with wife Teena, pedal biking, and assiduously courting, if with little success, the guitar.
