Vietnam’s bright future for solar power

Vietnam is set for a surge in power demand and consumption over the coming decade reports Fitch Solutions.  This Southeast Asian country is said to be one of the most carbon intensive countries in the world regarding greenhouse gas emissions, ranking only after China and Mongolia in the East Asia and Pacific region, according to Energy Live News.


According to an International Finance Corporation (IFC) study, while reducing emissions has been a national target to mitigate climate change impacts, it presents a $753 billion (£576bn) climate investment opportunity for Vietnam between 2016 and 2030.

This has catalysed the IFC’s new financing package of $212.5 million (£162m) to support climate-friendly projects in Vietnam. Energy Live News reports that the funding from IFC, a member of the World Bank, will enable VPBank to expand its lending to small and medium businesses and boost financing for projects that help reduce carbon emissions.

Economic growth

According to The Asean Post, Vietnam’s rapidly growing economy is generating an increase in energy demand which is forecast to grow 10% annually. The Vietnam Energy Outlook Report 2017 released by the Vietnamese government in collaboration with the Danish Energy Agency states that electricity demand is expected to grow eight percent annually until 2035.

Vietnam’s economy is forecast to grow at a rate of between 6.5 and 7.5 percent per year from now until 2030 – resulting in additional demand for energy.


Part of the reason for the increased demand in power capacity stems from the expanding industrial and manufacturing sector, due to the US-China trade war, which despite the partial trade agreement may still carry potential uncertainty and simmering conflicts.

According to Fitch Solutions, the Trade War has allowed Vietnam’s government to position itself outside of China’s shadow by creating an alternative manufacturing hub as a buffer against geopolitical uncertainties.  This manufacturing sector accounts for nearly 17% of GDP, making improving energy security crucial to sustaining Vietnam’s growth momentum over the longer term.

Other drivers of this surge in demand for power include positive demographics and rapid urbanization which Fitch forecasts to grow by an annual average of 6.7% between 2019 – 2028, one of the fastest rates in Asia.

While coal is being used as a solution to meet the upcoming surge in power demand, Fitch reports that renewables will offer complementary growth opportunities, particularly with the increasing environmental consciousness and pollution concerns against the use of coal.

Regulatory Environment

Vietnam’s increasingly supportive policy and regulatory environment for the renewables sector is played out in the country’s latest power development plan which aims to install 4 GW of solar capacity by 2025 and 12 GW by 2030, according to Fitch.

This is incentivized by preferential policies, attractive feed-in-tariffs (FITs) and other financial benefits such as preferential tax and duty levies, in order to attract foreign investments and growth in this sector.  Fitch also reports that the government has introduced a new direct power purchase agreement (DPPA) where renewable energy producers can sell and deliver electricity directly to corporate customers.  Additionally, there is a new power development plan on the horizon, expected to be published by June 2020.  Fitch believes that this will see non-hydro renewables likely getting a greater focus.

Despite the 20% cut to the FIT for ground-mounted and floating solar capacity in place since September 2019, Fitch anticipates that investor interest will remain buoyant because of the new FITs of $70.90 and $76.90/MWh for the two solar sub-segments respectively, providing a sufficiently high rate to attract investors, as auctions push prices down substantially in most alternative solar markets.

This will be further supported by falling technology cuts for solar due to cuts on solar module prices resulting from the slowing domestic solar growth and restricted access to the US and Indian markets, leading to supply gluts for the Chinese solar component manufacturers.  Fitch adds that some Chinese manufacturers have also set up manufacturing capacity in Vietnam to circumvent trade duties, enabling the presence of a local supply chain to further lower the prices for domestic use.

Investor sentiment

Increased investor interest has seen an increase in solar energy projects in line with the Fitch positive growth outlook.  This has been boosted by the government’s increase in solar project approvals since 2017.

Most notably, the Da Nhim-Ham Thuan-Da Mi Hydro Power Joint Stock Company (DHD) secured a $37 million financing agreement with the Asian Development Bank in October 2019 to develop a 47.5 MW floating solar plant at the Da Mi Hydropower plant, which will be one of the largest floating solar installations in the region.

Furthermore, Fitch reports that there have been other significant developments in the sector in 2019, resulting in the operation and grid connection of several firsts across various provinces, such as the 50 MW Cát Hiệp Solar Power Plant in Bình Đinh, the 275 MW Hòa Hội Solar Power Plant in Hà Tĩnh, and the 100 MW Srepok 1 and Quang Minh Solar Power Plant Complex in Đák Lák.

As Vietnam’s economy continuous to grow, the country’s needs to marry sustainability with meeting power demands will open up investment opportunities in solar power and other renewable energy resources across the country.


Catch some of Vietnam's sunny solar power investments

Let us shed some light on potential solar power investments in Vietnam and its bright suture.